Anna Frajtova - Fotolia
Myanmar’s central bank has released additional rules on mobile financial services that lay the foundation for efficient and secure mobile financial services in Myanmar.
While most of the Association of Southeastern Asian Nation (Asean) region adopts online and mobile banking, Myanmar remains almost completely cash dependent, with most salaries still paid in cash.
According to the Myanmar Times, the rules allow mobile financial service providers to offer services that include cash-in, cash-out transactions, money transfers and domestic payments in Mynamar Kyat.
However, they will not be able to complete the domestic side of international remittance transactions.
To offer mobile financial services, companies need to possess at least K3bn (US$2.57m) and pay K300m (US$256,000) for the application.
Patrick Kershaw is the investment director at Leo Tech, a software development company that has developed MywalletPlus, which is part of a suite of financial technology products currently deployed in Myanmar.
“The new regulation is forward thinking and allows the necessary freedoms for all parties to move forward confidently,” said Kershaw.
“The biggest risks addressed are around remittance and money flows, and special attention has been given to know your customer [KYC] and anti-money laundering [AML]. No limits have been placed on bill payments, which clearly promotes internal usage in the country,” he added.
Role of financial service providers in Myanmar
According to Sui-Jon Ho, market analyst for IDC Financial Insights Asia-Pacific, Myanmar’s central bank has clearly established the roles of financial service providers in this early stage of payment system reforms.
The capital requirements, stricter licence fees and a formalised application process has ensured that the market participation is currently only open to higher tier organisations.
“While smaller players are still permitted to facilitate domestic-only payments, including cash acceptance and disbursal, the more lucrative remittance market has become the purview of larger enterprises with at least US$2.5bn in capital,” said Ho.
“These restrictions would mitigate some of the fragmentation that would otherwise occur in a more liberalised ecosystem. At this stage, free-for-all participation may introduce systemic risks that the country would do well to avoid.”
There are already early collaborations between foreign telecommunications service providers, banks, non-bank financial service institutions and global suppliers in the mobile financial services space.
The major players are likely to be Telenor and Myanmar Posts and Telecommunications (MPT), said Kershaw. This is because Telenor possesses “more experience in the region than anyone else”, and MPT has the advantage of being the largest carrier, he added.
Read more about mobile payments
- Apple’s mobile payments service is popular with consumers and banks, but the company has yet to find ways to make ‘meaningful’ money from it.
- Samsung Pay is being used by around five million people in the US and South Korea, with China being the next step in its global launch.
- Online retail market growth in the Asean nations remains slow, but nonetheless significant, according to a survey of consumer habits in the region.
With a population of 60 million – of which fewer than 10% of adults have a bank account – the country has seen many turn to unregulated financial service providers, such as pawnshops, money lenders and hundis (payment brokers) for financial services.
While mobile money has the potential to fill this gap by offering financial services over mobile phones, from person-to-person transfers to more complex banking services, the way forward is not without challenges.
“While it may be easier for mobile payments to deliver added value to transactions – such as loyalty and reward systems, lifestyle marketing and bundled financial products – the service must ultimately be able to stand toe-to-toe with cash in terms of acceptability to be relevant to the common man,” said Ho.
Overcoming distrust of financial technology
Myanmar is a cash-based society with 97% of salaries in Myanmar paid in cash, according to research by Wave Money, a mobile money joint venture between Telenor and Yoma Bank.
“Our research from 2015 says that of the 3% of the population who do have bank accounts in Myanmar, only 5% of those have ATM cards, making access to cash difficult even if you are banked,” said Wave Money CEO Brad Jones.
Set against this backdrop, Jones said the success of mobile money services relies on creating awareness and overcoming distrust in formal financial services.
“Some 94% of consumers surveyed do not know what mobile money is, and consumers will initially have limited trust in the technology to keep their money safe,” said Jones.
“We are asking customers, many of whom have never used a financial service before, to leapfrog into a new financial world. The challenge is to address the last mile, to provide customers – particularly in rural areas – with a convenient service.
“If consumers are to benefit from the introduction of mobile money, distribution needs to be extremely broad, and far beyond the reach of bank branches today.”